Reference no: EM133089384

Question - Fabricante Ltd. manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $230,000 per year. Each product may be sold at the split-off point or processed further. The additional processing costs and sales value after further processing of each product (on an annual basis) are:

	Ace	Beckett	Cloud
Sales value at the split-off point	$82,000	$185,000	$113,000
Costs of processing further	$30,000	$65,000	$45,000
Sales value after processing further	$128,000	$240,000	$188,000

The "further processing costs" consist of variable and avoidable fixed costs.

Required -

a) Which product or products should be sold at the split-off point, and which product or products should be processed further? Show computations.

b) At least one product should not be processed further, based solely on quantitative data. Identify two qualitative factors that might influence whether or not to process such a product further. This is not something you can look up, and it is not heavily weighted for marks. The goal is to get you to think about the types of circumstances where the dollar considerations for that individual product are not the only relevant information to be considered.

c) For which decision are the joint costs relevant? Why?